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GS Paper: GS3-13.Infrastructure: Energy, Ports, Roads, Airports, Railways etc:

  • Major Port Authorities Bill, 2020

    Rajya Sabha has passed the Major Ports Authorities Bill 2020 with 88 votes for and 44 against it. The Bill was passed in Lok Sabha in September last year.

    Major Ports Authorities Bill 2020: Major: Highlights

    • The Bill provides for the regulation of major ports and will replace the Major Port Trusts Act of 1963, and a board of Major Port Authority for each major port will replace the current port trusts.
    • The Bill will apply to the major ports of Chennai, Cochin, Jawaharlal Nehru Port, Kandla, Kolkata, Mumbai, New Mangalore, Mormugao, Paradip, VO Chidambaranar and Vishakhapatnam.

    Boards to replace trusts

    • Under the 1963 Act, all major ports are managed by the respective Board of Port Trusts that have members appointed by the central government.
    • The Bill provides for the creation of a Board of Major Port Authority for each major port.
    • These Boards will replace the existing Port Trusts.
    • It will have a member each from the state governments, the Railways Ministry, the defence ministry, and the customs department.
    • The Bill allows the Board to use its property, assets and funds as deemed fit for the development of the major port.

    Board has financial powers

    • Under the 1963 Act, the Board had to seek the prior sanction of the Centre to raise any loan.
    • Under the new Bill, to meet its capital and working expenditure requirements, the Board may raise loans from any scheduled bank or financial institution within India, or any financial institution outside India.
    • However, for loans above 50% of its capital reserves, the Board will require prior sanction of the central government.

    The board will fix rates

    • At present, the Tariff Authority for Major Ports fixes the scale of rates for assets and services available at ports.
    • Under the bill, which now awaits President’s accent to become a law, the Board or committees appointed by the Board will determine these rates for services that will be performed at ports.
    • The services would include the access to and usage of the port assets, and different classes of goods and vessels, among others.

    Punishments

    • Under the 1963 Act, there are various penalties for contravening provisions of the Act.
    • The penalty for setting up any structures on the harbours without permission, for example, may extend up to Rs 10,000, and the penalty for evading rates may extend up to 10 times the rates.
    • Under the new Bill, any person contravening any provision of the Bill or any rules or regulations will be punished with a fine of up to Rs one lakh.

    Opposition criticism

    • Opposition parties had opposed the legislation terming it the move to privatize ports.
    • They said that this Bill is nothing but a retraction of the Singapore model.
    • When there were hue and cry that there cannot be the privatization of ports, it adopted a policy of so-called corporatization. Thereafter, it ultimately privatized its ports.
    • So, corporatization is the first step. The next in the offing is privatization said the opposition.

    What did the govt. say?

    • The government has brought in a provision that will allow ports to take their own decisions. To change tariffs, the ports have to now approach the ministry.
    • The port sector in the last six years has doubled the profit. Profit has increased, liabilities have come down. For modernization, 300 projects are ongoing.
    • This Bill is not to privatize any port, but it is to ensure that our ports can properly compete with private ports.

  • National Rail Plan for 2030

    The Budget unveiled the National Rail Plan 2030. 

    Key provision in the Budget for railways

    • First, there is a National Rail Plan (NRP) for 2030.
    • Second, the Western dedicated freight corridor (DFC) and the Eastern DFC will be commissioned by June 2022.
    • Parts of DFC will be in public-private partnership (PPP) mode.
    • Third, there will be an East Coast corridor (Kharagpur to Vijaywada), an East-West corridor (Bhusaval to Kharagpur/Dankuni) and a North-South corridor (Itarsi to Vijayawada).
    • Fourth, all broad-gauge routes will be electrified by December 2023.
    • Fifth, there will be safety and passenger amenity measures.

    National Rail Plan provisions

    • The NRP is meant to increase the share of railways in freight, rectifying the pre-Independence and post-Independence bias
    • It also aims to develop capacity that will cater to demand in 2050.
    • It provides for mapping of the existing railway network on a GIS platform.
    • The primary value addition of the NRP is an analysis of the existing network, with expected additions (such as the National Infrastructure Pipeline) also built in.
    •  NRP bases decision making on objective criteria.

    Pricing and cross-subsidy issue

    • In 2018-19, as per the NRP, India’s operating ratio (OR) was 0.59 for freight and 1.92 for passenger traffic.
    • The problem is low passenger fares and artificially high freight rates required to cross-subsidise those.
    • This is not the complete picture since normally, freight and passenger trains share common sections of track and passenger trains are given preference over goods trains in getting a path (route from point A to point B).
    • Therefore, the average speed of a freight train is 24 km/hour — average speed is a surrogate indicator.
    • A superior indicator is transit time — the time taken for a consignment to reach from one point to another.

    Need for decreasing the cost and increasing the average speed

    • Indian Railways has a system of HDN and HUN identification for the present network.
    • HDNs are high-density routes.
    • HUNs are highly-used networks with multiple origins and destinations and no clear single haul corridor.
    • HUNs are primarily for passengers.
    • For freight, HDNs are important.
    • HDNs and HUNs carry 80 per cent of the traffic and there are sections where capacity utilisation is more than 100 per cent.
    • With traffic increasing, capacity utilisation will worsen.
    • If the intention is to increase rail share in the total freight carried to 44 per cent, the average speed must increase and costs must decline.
    • With the Western and Eastern DFCs, both should happen.

    Consider the question “What are the factors responsible for preventing the railways from realising its contribution in the development of the country. How far will the National Rail Plan help railways deal with these factors?” 

    Conclusion

    The implementation of the NRP will help railways deal with the issues faced by it.

    Back2Basics: Operating Ratio

    • The operating ratio shows the efficiency of a company’s management by comparing the total operating expense of a company to net sales.
    • An operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating expenses are becoming an increasingly smaller percentage of net sales.

    OR = (Operating Expenses + Cost of Goods Sold)/ Net sales​ 

     

  • Significance of crude oil crossing $60 a barrel

    The price of Brent crude crossed the $60 per barrel mark after over a year on the back of oil-producing countries maintaining production cuts due to lockdowns.

    What is Crude Oil?

    • Petroleum also known as crude oil and oil is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth’s surface.
    • It is commonly refined into various types of fuels.
    • Components of petroleum are separated using a technique called fractional distillation, i.e. separation of a liquid mixture into fractions differing in boiling point by means of distillation, typically using a fractionating column.
    • It consists of naturally occurring hydrocarbons of various molecular weights and may contain miscellaneous organic compounds.
    • The name petroleum covers both naturally occurring unprocessed crude oil and petroleum products that are made up of refined crude oil.

    Why has the price of crude oil risen sharply?

    • Major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic.
    • However oil-producing countries have continued to limit production despite an increase in prices with Saud Arabia cutting its own oil production by 1 million barrels per day to strengthen crude oil prices.
    • Expectations of strong improvements in demand with the global rollout of the Covid-19 vaccine have also put upward pressure on crude oil prices according to experts.

    How will this impact India?

    • The rise in the price of Brent crude will lead to an increase in India’s import bill.
    • India imports of 80 per cent of its crude oil requirements and the average price of Indian basket of crude oil has already risen to $54.8 barrel for January.
    • The upward move in crude prices will also put upward pressure on petrol and diesel prices across the country which is already at all-time highs.

    Signs of no remedy

    • The government had hiked central taxes on petrol and diesel by Rs 13 per litre and Rs 11 per litre in 2020 to boost revenues amid lower economic activity.
    • The increase in taxes had prevented consumers from getting the benefit of low fuel prices as international prices crashed during the first quarter of last fiscal.

  • Denmark’s artificial energy island project

    The Danish government has approved a plan to build an artificial island in the North Sea as part of its effort to switch to green energy.

    The Energy Island concept provides an innovative solution for countries like India grappled with the scarcity of land required for RE projects!

    What is Energy Island?

    • An energy island is based on a platform that serves as a hub for electricity generation from surrounding offshore wind farms.
    • The idea is to connect and distribute power between Denmark and neighbouring countries.

    What is the Danish project?

    • Denmark has already entered into agreements with the Netherlands, Germany and Belgium to begin the joint analysis of connections in the energy island.
    • The project is being called the largest construction project to be undertaken in Denmark’s history with an estimated cost of DKK 210 billion.
    • In June 2020, the Danish Parliament decided to initiate the construction of two energy islands, which will export power to mainland Denmark and neighbouring countries.
    • One of these islands will be located in the North Sea and the second island, called the island of Bornholm, will be located in the Baltic Sea.
    • The artificial island will be located about 80 km into the North Sea and the majority of it will be owned by the Danish government.

  • [pib] Ropeways and Alternate Mobility Solutions to be under MoRTH

    The Ministry of Road Transport and Highways will, from now on, also look after the development of Ropeways and Alternate Mobility Solutions (AMS).

    Q.With growing mobility and diverse terrain across the country, it is imperative that all solutions be enabled and implemented. In this light, discuss various changes adopted by the Transport Ministry in this regard.

    Ropeways

    • A ropeway is a form of naval lifting device used to transport light stores and equipment across rivers or ravines.
    • It comprises a jackstay, slung between two sheers one at either end, from which is suspended a block and tackle, that is free to travel along the rope and hauled back and forth by inhauls.
    • An amendment to the Government of India (Allocation of Business) Rules, 1961 has been notified, to enable this step.

    Impacts of the move

    • The move is expected to give a boost to the sector, by setting up a regulatory regime and facilitating research and new technology to come into this sector.
    • This means that the Ministry will have responsibility for the development of ropeway and alternative mobility solutions technology, as well as construction, research, and policy in this area.
    • Formulation of the institutional, financial, and regulatory framework for the technology will also fall under the ambit of this move.

    Expected benefits

    • Last-mile connectivity for remote locations
    • Reducing congestion on mainstream roads
    • Chance to develop world-class ropeway infrastructure
    • Setting up of an organised  and dedicated rope-way and alternative mobility solutions industry
    • New technology, like CPT – Cable Propelled Transit coming to the sector
    • Setting safety norms for unregulated ropeways
    • Allowing freight and goods at remote stations
    • Regulating tariffs structure for the technology

  • [pib] International Energy Agency (IEA)

    The Framework for Strategic Partnership between the International Energy Agency (IEA) members and India was signed yesterday to strengthen mutual trust and cooperation & enhance global energy security, stability and sustainability.

    Try this MCQ:

    Q.The Global Energy Transition Index recently seen in news is released by:

    a) International Energy Agency (IEA)

    b) World Economic Forum (WEF)

    c) International Renewable Energy Agency (IRENA)

    d) International Solar Alliance

    International Energy Agency

    • The IEA is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis.
    • It was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.
    • At the end of July 2009, IEA member countries held a combined stockpile of almost 4.3 billion barrels of oil.
    • They are required to maintain total oil stock levels equivalent to at least 90 days of the previous year’s net imports.
    • The IEA acts as a policy adviser to its member states but also works with non-member countries, especially China, India, and Russia.
    • The Agency’s mandate has broadened to focus on the “3Es” of effectual energy policy: energy security, economic development, and environmental protection.

    Greater role play

    • The latter has focused on mitigating climate change.
    • The IEA has a broad role in promoting alternate energy sources (including renewable energy), rational energy policies, and multinational energy technology co-operation.

    Why need a partnership with IEA?

    • This partnership will lead to an extensive exchange of knowledge and would be a stepping stone towards India becoming a full member of the IEA.
    • India and the IEA members will work as Energy Security, Clean & Sustainable Energy, Energy Efficiency, Enhancing petroleum storage capacity in India, Expansion of gas-based economy in India, etc.

  • Shipping sector in india

    The article deals with the problems faced by India’s shipping sector and suggests the measures to improve the shipping sector.

    Importance of shipping for economic growth

    • The major economies of the world have always realized the potential of shipping as a contributor to economic growth.
    • For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI).
    • However, geographically, China is not as blessed as India, yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council.
    • What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.

    Lack of carrying capacity

    • All the shipping infrastructure in peninsular India only helps foreign shipping liners.
    • India has concentrated only on short-term solutions.
    • Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too.
    • As a country, we have still not optimized our carrying capacity. 
    • Much of foreign currency is drained as transshipment and handling costs every day.
    • Due to this, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves.
    • As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.

    Way forward

    1) Regional cargo-specific ports

    • Instead of creating regional cargo-specific ports in peninsular India, we allowed similar infrastructural developments in multiple cargo-handling ports.
    • As a result, Indian ports compete for the same cargo.
    • We need to make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transshipment hubs.
    • We need to only concentrate on developing the contributing ports to serve the regional transshipment hubs for which improving small-ship coastal operations is mandatory.

    2) Sagarmala

    • Sagarmala aims are port-led industrialization, development of world-class logistics institutions, and coastal community development.
    • Sagarmala will help in increasing domestic carrying capacity.
    • Shipbuilding, repair, and ownership are not preferred businesses in India and the small ship-owning community in India also prefer foreign registry instead of domestic registration.
    • If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
    • ‘Make in India’ will result in multi-folded cargo growth in the country, we need ships to cater to domestic and international trade.
    • Short sea and river voyages should be encouraged.
    • Shipbuilding and owning should be encouraged by the Ministry.
    • The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member.
    • The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
    • Coastal communities should be made ship owners.
    • This will initiate the carriage of cargo by shallow drafted small ships through coast and inland waterways.
    • Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.

    Consider the question “How shipping contributes to the economic prosperity of a country? Suggest the steps need to be taken to develop its shipping sector.”

    Conclusion

    Shipping plays an important role in the economic development of a country. India needs to focus on developing it to achieve the economic prosperity.

  • Green Tax for personal vehicles older than 15 years

    The Union Minister for Road Transport and Highways has approved a proposal to levy a ‘green tax’ on old vehicles.

    Do read about Green Mobility, India’s FAME-I and II Scheme.

    Green Tax

    • Personal vehicles will be charged a tax at the time of renewal of Registration Certification after 15 years.
    • The policy will come into effect from April 1, 2022.
    • The levy may differ depending on fuel (petrol/diesel) and type of vehicle.
    • The proposal will now go to the States for consultation before it is formally notified.
    • It includes 10-25% of road tax on transport vehicles older than eight years at the time of renewal of fitness certificate.
    • The proposal on green tax also includes a steeper penalty of up to 50% of road tax for older vehicles registered in some of the highly polluted cities in the country.
    • Revenue collected from this tax will be kept in a separate account and will be used for tackling pollution, and for States to set up state-of-art facilities for emission monitoring.

    Why such a move?

    • To dissuade people from using vehicles which damage the environment
    • To motivate people to switch to newer, less polluting vehicles
    • Green tax will reduce the pollution level, and make the polluter pay for pollution

    Exemptions to this tax

    • Vehicles like strong hybrids, electric vehicles and alternate fuels like CNG, ethanol, LPG etc to be exempted;
    • Vehicles used in farming, such as tractor, harvester, tiller etc to be exempted;

    Other proposals

    • The Ministry also approved a watered-down policy of deregistration and scrapping of vehicles, bringing only those vehicles owned by government departments and PSUs and are older than 15 years under its ambit.
    • In 2016, the Centre had floated a draft Voluntary Vehicle Fleet Modernization Programme that aimed to take 28 million decade-old vehicles off the road.

  • True empowerment of the electricity consumer

    The article examines the various provisions of the Electricity (Rights of Consumers) Rules, 2020 and analyses whether or not these Rules will empower the consumers. 

    Empowering electricity consumers

    • The Electricity (Rights of Consumers) Rules, 2020 was promulgated in December to deal with the problems faced by the consumers.
    • The enactment of consumer-centric rules does spark public debate that brings the rights of consumers to the fore.
    • the Rules lay an emphasis on national minimum standards for the performance parameters of DISCOMs. without urban-rural distinction.
    • They also reiterate the need for automatically compensating consumers.

    Let’s analyse the changes introduced by the new Rule and issues with them

    Supply quality issue

    • Many States have not been able to provide quality supply, especially to rural and small electricity consumers.
    • Provisions similar to made in the new Rule already exist in the Standards of Performance (SoP) regulations of various State Electricity Regulatory Commissions (SERCs).
    • It is not because of a lack of rules or regulations that quality supply is not provided; rather, it is on account of a lack of accountability systems to enforce them.
    • Unfortunately, neither these rules nor past efforts address these accountability concerns.
    • Guarantee of round the clock supply is a provision that the Rules emphasise, which might be missing in State regulations.
    • It is difficult to enforce since the availability of power supply is inadequately monitored even at 11 kV feeders, let alone at the consumer location.
    • This highlights not only the need for implementation of existing provisions in letter and spirit but also amending them with strong accountability provisions.

    Weakening of existing provision

    • The Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
    • For example, the Rules say that faulty meters should be tested within 30 days of receipt of a complaint.
    • Compared to this, regulations t in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
    • A similar observation can be drawn from the suggested composition of the Consumer Grievance Redressal Forum. 
    •  The Rules say that the forum — constituted to remedy complaints against DISCOMs should be headed by a senior officer of the company.
    • This is a regressive provision that would reduce the number of cases that are decided in favour of consumers.

    Lack of clarity on net-metering

    • The Rules guarantee net metering for a solar rooftop unit less than 10 kW.
    • However, there is no clarity if those above 10 kW can also avail net metering.
    • This could lead to a change in regulations in many States based on their own interpretations.
    •  The possible litigation that follows would be detrimental to investments in rooftop solar units, and would discourage medium and large consumers to opt for an environment-friendly, cost-effective option.

    Way forward

    • SERCs should assess the SoP reports of DISCOMs and revise their regulations more frequently.
    • SERCs should organise public processes to help consumers raise their concerns.
    • DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online.
    • The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
    • Central agencies have taken proactive efforts to ensure regular tariff revision.
    • They could also support independent surveys and nudge State agencies to enforce existing SoP regulations.
    • The central government could disburse funds for financial assistance programmes based on audited SoP reports.

    Consider the question”What are the problems faced by the electricity consumers in India? Will the Electricity (Rights of Consumers) Rules, 2020 help consumers to deal with the existing issues?”

    Conclusion

    The governments, DISCOMs and regulators need to work jointly and demonstrate the commitment and the will power to implement existing regulations. It is not yet late to recognise this and initiate concerted efforts to truly empower consumers.

  • Hybrid Annuity Model(HAM) for the benefit of the road sector

    The article explains the working of Hybrid Annuity Model in the road construction and the risks involved in the model.

    Investment in road sector

    • The central government has set a target of increasing the investment in infrastructure to over Rs 111 lakh crore over the period FY20-FY25.
    • Within the transportation segment, projects worth Rs 36.7 lakh crore, constituting 55% of transportation infra, are for the road sector.
    • The large investments planned in the road sector signifies its importance—it has a multiplier effect on the economy and provides large employment opportunities.

    Models for the road sector

    • Out of HAM (Hybrid Annuity Model) and BOT (Build, Operate and Transfer)—toll developers prefer the relatively lower risk HAM model.
    • This is due to its various positives like lower equity requirements, provision for mobilisation advances, better right of way availability, inflation-linked adjustments for bid project cost, termination payments during the construction period and de-linking construction and operations.
    • These HAM features have garnered a favourable response and mix of HAM awards has increased from 10% in FY16 to 48% in H1FY2021.

    How HAM works and risks involved

    • During the operations period for a HAM project, the recovery from authority is in the form of fixed annuity payments along with interest on balance accumulated annuity payments (calculated @300 bps over prevailing bank rate)
    • The only major risk for HAM is the prevailing low bank rates adversely affecting the overall project viability and returns.
    •  Such interest receipts account for around 45% of total inflows.
    • Low bank rate would thus reduce the overall inflows for a HAM project, thereby adversely affecting its debt coverage metrics and returns to the investors.
    • The second problem is related to delayed and inadequate interest rate transmission—there is a transmission lag for the project loan (linked to MCLR of banks).

    Changes in model concession agreement

    • As per revised concession agreement dated November 10, 2020, interest rate on annuities will be equal to the average MCLR of top 5 scheduled commercial banks plus 1.25% instead of bank rate.
    • With the average MCLR replacing the bank rate, there will be a natural hedge between the annuity inflows and interest costs,
    • This will reduce the interest rate risks to a large extent, and that too without any delay.
    • The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
    • The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
    • Thus, the spacing between the payment milestones is reduced.
    • This will improve the cash conversion cycle for the contractors executing the HAM projects as their payments are back to back in nature.
    • However, these changes will be applicable for new awards, and the fate of the existing HAM projects is hanging in the balance.

    Conclusion

    With improved attractiveness, HAM is expected to remain the mainstay for public-private partnership projects in the road sector.

    Source:-

    https://www.financialexpress.com/opinion/hamsome-gains/2171329/